Trump Saw CPI And Went 'Uh Oh'

President Trump reversed on adding tariffs on multiple consumer products yesterday. Why yesterday? Because yesterday coincided with a scary CPI number. I think the president realized that the Fed is going to be much closer to their 2% inflation target which means fewer rate cuts. It could mean rate hikes.

Quick Review

If you go back to our article a month ago when Fed Chair Powell turned dovish we were surprised that inflation was probably going to start running higher. Cutting rates when inflation accelerates is a very strange nuance.

That's why we said then, "Something's not quite right."

This is playing out and I think the Fed's going to have to backtrack on all their lovey-dovey dovish predictions of rate-cuts-forever no matter what.

Why?

Because inflation is picking up.

Trump Worried About The CPI

Here's what President Trump said yesterday,

“We’re doing this for the Christmas season. Just in case some of the tariffs would have an impact on U.S. customers.”

Let me break that down for you.

I ask you this - what "impact" could "tariffs" have on "customers?"

Tariffs raise prices for consumers. Fair.

That's precisely the economic number that reported yesterday - the CPI, the consumer price index.

And it jumped now two months in a row.

President Trump saw that number and likely went "uh oh," inflation is moving up and that's going to stop the Fed from cutting rates.

That's also why he wants to push off tariffs until the holidays. By then goods already have been shipped at the lower prices ahead of newer tariffs.

Why else?

Let the Fed worry about tariffs' inflation impact in 2020. But the Fed typically doesn't like to raise rates in an election year. So President Trump wants to push off this next round of tariffs to next year so the Fed doesn't have to meddle with elections by raising rates.

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Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own ...

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